Minnesota and other Midwest manufacturers slowed in December to one of the worst performances in six years due to the strong U.S. dollar and weaknesses in Canada and abroad, according to a widely watched economic report.
"Those factors will continue to squeeze U.S. and regional manufacturers," said Ernie Goss, director of Creighton University's Economic Forecasting Group, which produces the Mid-America Business Conditions Index.
For December, the index for the nine-state region that includes Minnesota fell to 39.6 from 40.7 in November. Minnesota's Business Conditions Index slumped in December to 39.4 from November's 41.1. Any index below 50 signals economic contraction. But December's slippage marked one of the worst readings since the recession-plagued 2009.
Surveyed supply managers noted significant slowdowns in most categories, including new orders, sales, delivery lead times, inventories and employment. Food-processing firms reported the most declines, while medical equipment makers saw gains.
Economists noted that central U.S. factories laid off workers, siphoned off existing inventory and saw export orders plummet during the month.
The national manufacturing index reported Monday by the Institute of Supply Management (ISM) was also lackluster and "below growth neutral" at 48.2. The national ISM report signaled that U.S. producers were still struggling with sunken oil prices that put the brakes on new orders for equipment and supplies.
Goss said he expects the weakness in manufacturing to spill over into the broader economy during the first quarter of 2016.
Chad Moutray, chief economist for the National Association of Manufacturers, said lower energy prices have trickled down to suppliers of the energy industry. That helped take the national index down to 48.2, the "lowest level since June 2009," he said. That's in "sharp contrast to the modest growth seen 12 months prior to [December]." The index peaked at 58.1 in August 2014.
